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Cutting business taxes is the best way to get the economy moving faster

By Jan De SilvaOpinion

Tues., June 5, 2018

While the 2018 Ontario election has largely focused on the politics of personality, the closing days have been hit by a brewing trade war with our largest trading partner, leading to renewed uncertainty over NAFTA and threatening to upend Ontario’s economy. In this environment the Toronto Region Board of Trade believes a renewed focus on Ontario’s economic fundamentals is needed.

Businesses face obstacles preventing them from being powerful engines of inclusive growth. Beyond the trade issue, key areas where the Ontario government makes, or influences policy — notably labour costs, housing affordability and energy prices — have created challenges.

“A thriving private sector means more jobs and higher wages, better goods and services and greater revenues for government to spend on important social programs,” writes Jan De Silva. (Dreamstime)

To offset these headwinds, the board recommends the next government cut business property taxes. Here’s why.

In a recent study by the board on business competitiveness, Ontario ranked 9 out of 15 in comparison with our closest competitors in Canada and the U.S. — a bottom quartile result that is even more concerning as the impact of U.S. corporate tax changes had not been factored in. This should be a wake-up call that we must do better if we want a high-growth economy that will deliver the revenues needed for robust social programs.

One key area where the province can make an immediate difference is by cutting business taxes. There are a variety of business tax changes that could be considered, but the board believes the best way to kick start our economy is to cut provincial property taxes (PPT).

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Also known as business education taxes, local school boards collected these property taxes to fund education. Some school boards levied higher taxes than others. In 1998, school funding was uploaded to the province, which began funding on a per-student basis. The PPT funds now go directly into general revenue.

The trouble is, 20 years later, some municipalities still have higher rates than others even though education funding is standardized across the province. As a result, business on one side of Steeles Ave. pays more in PPT than a business on the other side, but doesn’t receive better services. Businesses in cities such as Kingston and Waterloo pay as much as 60 per cent more tax per dollar of property value compared to those in other cities. It’s not fair and needs to change.

Beyond achieving fairness, harmonizing and cutting the PPT would also significantly help businesses compete and grow. As the C.D. Howe Institute found in 2017, cutting PPT is more likely to spur investment and growth than other tax changes.

In a city like Kingston, a cut to the PPT could return more revenue to the province in income tax than it currently does in property tax. That’s because a PPT cut directly helps those with stores, offices and factories in Ontario, those employing our families and neighbours. In particular, it brings substantial relief to small businesses, which are struggling with energy prices, labour costs and taxes.

We know investments in transit to alleviate gridlock are critical to the foundation our economic future, but construction takes time. Not much can be done to bring down energy prices in the near term. That’s why the board’s Agenda for Growth campaign focuses on transit, housing and energy as foundational solutions. But strategically cutting business tax today, will immediately help spur the economy.

We know Ontario has all the ingredients for success. Our population is highly educated, while our diverse society remains open and accepting. Our economy is bolstered by an array of business clusters from automotive and financial services to health sciences and agriculture. Our social programs, such as health care and education, ensure everyone can succeed.

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It’s easy to declare that if the economy is already growing, things are good enough for business with no need to take further action. Not only is this short-sighted, but it ignores the risks on the horizon. We can and should do more.

A thriving private sector means more jobs and higher wages, better goods and services and greater revenues for government to spend on important social programs.

Ontarians head to the polls on Thursday. Whichever party wins must prioritize growing Ontario’s economy. Starting with a cut to provincial property taxes, we can have a world-leading economy where everyone benefits.

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